By Gina Lee
Investing.com – LG Chem Ltd . (KS:051915) shares slid nearly 10% after General Motors Co. (NYSE:GM) said it would recall around 73,000 Chevrolet Bolt electric vehicles fitted with the South Korean company’s batteries.
LG Chem shares slid 8.13% to KRW367,500 ($312.39) by 12:05 AM ET (4:05 AM GMT).
GM expanded its recall of Bolt electric vehicles on Friday due to fire risks from what it claimed were battery manufacturing defects. The expansion is expected to cost $1 billion, for which GM will seek compensation from LG Chem. GM will also halt sales of the electric vehicles beginning model year 2019.
The recall will impact the preparations to list spinoff LG Energy Solution (LGES), on the South Korean bourse, with around $5 billion of LG Chem’s market value shaved off and the company’s shares headed towards their biggest intraday percentage loss since March 2020.
"The market expects that LGES would launch its IPO in September, but with GM's expanded recall, the LGES IPO is likely to be delayed for a month or two, because the company needs to reflect the recall cost before finalizing the IPO paperwork," Samsung (KS:005930) Securities analyst Hyun-Ryul Cho told Reuters.
"If LG does not manage to solve its battery defect issues, it will eventually hit its future orders from carmakers. If more fire risks/accidents arise, LG's position in the global EV market would be weakened," Cho added.
The Bolt recall comes a mere six months after Hyundai Motor Co. (KS:005380) said it would recall around 82,000 electric vehicles, including the Kona, globally due to fire risks, with the cost estimated at around KRW 1 trillion ($850 million).
LG Chem’s other high-profile customers include Tesla Inc. (NASDAQ:TSLA) and Volkswagen AG (DE:VOWG), with KRW815 billion, or 40% of operating profit, generated by its battery business, including electric vehicle batteries, in the April to June 2021 period.